Majid Davoudi Nasr - Department of Accounting , College of Management, Arak Branch, Islamic Azad University, Arak, Iran
Mohsen Cheraghi - Department of Economic, Tafresh Branch, Islamic Azad University, Tafresh, Iran

Changes in credit risk may arise when either the value or the risk of corporate assets changes. Changes in the equity value associated with the changes in the asset value and changes in asset risk can be characterized into potentially countervailing direct and indirect effects. The indirect effect of risk on equity value is a function of factors that affect the debt value of including leverage, asset value, and asset risk. This study examines whether the equity value reflects the profits and losses associated with the changes in the debt value consistent with the predictions of Merton [۲۱]. The insurance companies listed in the Stock Exchange during ۲۰۱۰-۲۰۱۵ were selected to test the desired hypotheses. It has been found that the stock returns are negatively related to the increase in credit risk as reflected in the changes of estimated bond ratings. More importantly for the research question, it has been realized that the relationship between risk changes and equity returns is negative when the leverage is higher.

Diversification Strategy, Cost Leadership Strategy, Product differentiation strategy